Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
FROM:	Diane Stoddard, Assistant City Manager
CC:	Cynthia Boecker, Assistant City Manager Roger Zalneraitis, Economic Development Coordinator/Planner
Date:	August 4, 2008
RE:	Tax Increment Financing Policy and Transportation Development District Policy

As discussed at a study session in January, many cities have adopted policies on various economic development tools. Several of the larger cities in Kansas have adopted policies regarding the establishment of tax increment financing (TIF) districts and transportation development districts (TDDs). TIF districts provide a redevelopment tool that enables the incremental revenues from a development to pay for public improvements associated with the development in order to help spur development. TDDs are a tool to enable the use of either special assessments or a special sales tax to be added to an area with the owner’s consent to finance certain transportation infrastructure projects.

At its April 8, 2008 meeting, the City Commission reviewed draft TIF and TDD policies and provided comment. City staff was asked to solicit comments and input from the public and then bring the document back for formal consideration. The City Commission’s comments are summarized below along with other comments received regarding the draft policies.

Comment Summary:

The following groups or individuals provided comment on the draft TIF and TDD policies:

City Commission (excerpt from April 8, 2008 meeting minutes):

Expand the “but-for” principle to elaborate on the need to compare appropriate market return information as was done with the Oread project
Emphasize redevelopment as a key focus for the policies

Public Incentive Review Committee (excerpt from April 17, 2008 meeting minutes):

Commissioner Johnson indicated that he supported no fees associated with TIF and TDD due to the development the policies were aimed to spur
There was discussion about the “but/for” requirement
Brenda McFadden indicated that the policy should be clear about what financial information may be needed from the applicant

Douglas County (excerpt from May 12, 2008 meeting minutes):

Commissioner Jones indicated that he thought that debt should be the responsibility of the applicant, as with the Oread project
More clearly define cost-benefit analysis required; reference statute on required feasibility study
County Commissioners indicated they were supportive of the TIF and TDD policies

Betty Alderson, citizen (phone conversation):

TIFs have a place, but doesn’t agree that Oread project is a good use of TIF
The community has been very easy on developers
Prefers that applicant pay application fee and ongoing administrative fees like other cities
Doesn’t believe that project costs should be reimbursed to the developer (referring to TIF-eligible expenses such as feasibility study costs, etc)

Sustainability Advisory Board (letter):

Need to include provisions for environmental performance

Options- List LEED certification as an add to create additional merit for the project, perhaps consider this as part of the tax abatement policy discussion at a later date

Include an assessment of the project’s negative or positive impact on the environment (make sure that environmental impact information is requested and collected upfront)

Marlene Merrill, School Board Member (e-mail):

Require developers to show level of profit; if greater than 15%, taxpayers should be reimbursed quicker

Options- Feasibility study in analysis of “but-for” can do this by examining market return

Important to measure the benefits of a project

Feasibility study is required for TIF and a benefit-cost model could also be utilized

Need a way to collect baseline information on a TIF district
Need to be more specific regarding the process- who will collect baseline information, what will be collected and how it will be shared with the community

Kirk McClure, citizen (letter):

A developer should be fully transparent regarding all financial aspects of a project to the public
Need a more rigorous method of identifying and quantifying the benefits; need a cost-benefit model
Pay-as-you-go should be favored over debt
Need to specify that the tax increment income will not be more than the project costs
Need to clarify what developer contribution means
Procedural change recommended- someone on staff with the ability to negotiate real estate and has economic development skills should be considered

Discussion:

The draft TIF and TDD policies have been developed using the elements from other communities as a guide. It is important to emphasize that, rather than simply reiterate in the City policy the process requirements and other issues outlined in state statutes, generally these draft policies emphasize additional process clarifications and requirements not provided in state statutes. The state statutes will serve as a guide for the appropriate process steps.

In response to the comments received to this point, the TIF and TDD policy drafts have been modified as shown in the attached marked up version and summarized below. Staff has tried to be as responsive as possible to the comments received.

TIF Policy Draft:

The draft policy was changed in the following manner:

· More clearly emphasizes redevelopment for the use of the TIF tool by adding a “whereas” clause at the beginning of the document and added a new sentence at the end of the policy statement that stresses redevelopment.

· Moved the policy statement to the beginning of the policy.

· Added reference to the importance of environmental sensitivity and energy efficiency.

· Changed references from “developer” to “applicant” for consistency.

· Clarified “but for” analysis to include analysis of appropriate market return for the project and added reference to the feasibility study as a requirement of the state statute.

· Added a statement that private financing will be encouraged and viewed more favorably by the City than special obligation financing.

· Added a statement that calls for the procedural steps for creating a redevelopment district be set forth for the public and applicant at the time that the City Commission indicates a willingness to proceed with the process for creating a district.

· Added a statement that emphasizes transparency in the process, while balancing the need for certain applicant information to remain confidential, and emphasizes public participation.

· Added other minor clarifications.

TDD Policy Draft:

The draft policy was changed in the following manner:

Changed references from “developer” to “applicant” for consistency.
Added a statement that emphasizes transparency in the process, while balancing the need for certain applicant information to remain confidential, and emphasizes public participation.
Added statement that pedestrian and public transportation needs should be considered when establishing a TDD.

Requested Action:

City staff recommends that the proposed policies be adopted by the City Commission.

Attachments: